Eurozone bank needs more scrutiny, says NGO
By Jean Comte
The European Central Bank (ECB) should leave the "troika" of lenders to EU countries and be put under increased scrutiny, according to Transparency International (TI).
In a report published on Tuesday (28 March), the NGO said that the eurozone's central bank enjoys an "extraordinary degree of latitude", which keeps it out of "appropriate democratic scrutiny".
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"No other central bank in the world holds that power," the report says, referring to the ECB's critical role in the financial crisis, which was necessary to maintain the unity of the euro area.
"No decision by the US Fed could result in the ejection of a state from the Union," it says, comparing the ECB to the US Federal Reserve.
The ECB, under its two presidents, Jean-Claude Trichet and Mario Draghi, took decisions that were described as technical but were highly political and went beyond its mandate, according to Transparency International.
In 2010 and 2011, the ECB sent letters to the Irish, Spanish and Italian governments, making its financial support conditional to structural reforms or budgetary cuts. The letters were not public at the time, but were either leaked or published later.
"The ECB held the key to keeping member states within the euro that may otherwise have faced a disorderly exit," the report notes.
In February 2015, after radical left politician Alexis Tsipras came to power in Greece, the ECB said it would not accept Greek bonds as collateral for loans from Greek banks.
And in July 2015, after Tsipras called a referendum on the bailout terms, the ECB refused to increase the level of emergency liquidity assistance (ELA) to Greek banks - a decision that led the Greek government to impose capital controls.
"The ECB’s discretionary powers allowed it to put pressure on Greek banks while negotiating bailout reforms with the Greek government as part of the Troika of international creditors," which includes the European Commission and the International Monetary Fund, says Transparency International.
Saving the euro
TI recognises that decisions by the ECB were crucial in a time of crisis, noting that it has done "more than any other actor to save the financial and economic system of the euro area from collapse."
But it insists that "the ECB needs democratic oversight if the euro is to survive the next crisis," and should leave the troika.
"The ECB should no longer play a substantive role in the Troika and should have no formal role in the negotiation and monitoring of the conditions for receiving bailout funds," it says.
The ECB is already under oversight through the so-called "monetary dialogue", a regular hearing organised with the European Parliament. But this is "not exactly a ‘grilling’ of the ECB’s leadership," regrets TI, calling to change the rules on the ECB's independence and accountability.
TI proposes the creation of an "agreement" with the European Parliament and the Eurogroup, the body of eurozone finance ministers, to set the rules for decisions "that go beyond its mandate but could help avert or contain a crisis" - such as limiting its direct support of a country or making it conditional on structural reforms.
Other measures include giving the EU parliament the power to confirm the appointment of members of the bank's executive board.
The NGO also says that the ECB should publish its decisions and opinions, join the EU lobbying transparency register, and oblige members of its governing council to publish public declarations of interest.
And, because "many executive board members" have taken up job posts in private finance after their mandate ended, it calls for a 2-year "cooling-off period".
"Some recommendations of the report fall outside the ECB’s mandate or were not foreseen in the Treaty," reacted the ECB in a statement on Tuesday.
Benoit Coeure, a member of the executive board, said on Tuesday that the ECB was already "accountable for its policies", referring to the hearings at the EU parliament.
At a seminar organised by TI on Tuesday about its report, Coeure praised the transparency policy of the institution, referring to the publication of the accounts of its governing council meeting, and of the diaries of its executive board members.
He defended the way the ECB acted during the Greek crisis, saying that the conditions for collaterals and ELA were "transparent and equal for all counter-parties in the euro area".
Speaking to EUobserver, several EU officials who followed the Greek negotiations in 2015 said that the ECB always operated in a clear legal environment.
"The situation was different in 2010," said one official. "Back then, the ECB was more directly involved in the negotiation of the measures."
Strangling the Greek economy
Since the 2012 creation of the European Stability Mechanism (ESM), the eurozone emergency fund, the ECB mostly provides a support role in the development of stability programmes.
A diplomatic source said that the ECB's decisions to limit liquidity to Greek banks in 2015 were "justified" and "well-argued" at the time.
"If there were a problem, there would have been a formal complaint at the Court of Justice – and I did not see that happening," the source said.
A former Greek official, with knowledge of the bailout talks in 2015, said that the responsibility of the ECB in the Greek crisis was nothing new.
"There is already plenty written on this topic," he said. "The ECB is the one who strangled the Greek economy."